S per the gaap financial reporting model reliability

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are the same throughout the United States (U.S.) per the GAAP (Financial Reporting Model). Reliability means financial reports should use the GAAP basis and should not contain any errors; thus, building trusts in the financial information of the organization (Financial Reporting Model). Relevance is that the financial reports should address concerns of what is being read, i.e. relevance to future revenue or earnings per share figures (Financial Reporting Model). Materiality contains that not all financial reports can be a hundred percent correct and that the error is determined to be material or immaterial. An example would be that a small company has misstated one thousand dollars and this could be considered material, while a large corporation could consider this misstatement as immaterial (Financial Reporting Model). Cost versus benefit is simply that the cost should not outweigh the benefit of the management information systems development (Financial Reporting Model). Now that these characteristics are explained, the assumptions of the financial reporting model are established and includes periodicity, economic entity, monetary unit, and going concern . Periodicity is defined when the firm’s specific period results are reported. Monetary unit is defined as how the business’ activities unit dollar is measured. Going concern is simply the continual existence of the business. Economic entity is that a firm does not combine the transactions for various businesses consecutively (Q&A: Financial Reporting Model). Financial Reporting Model Principles The model of financial reporting is assisted by principles. These principles include: full disclosure, matching, revenue recognition, and historical cost. Full disclosure is defined as when a company provides enough data that allows an average investor to buy or not the stock of the company. Matching is defined as expenses that are debited against gains when the correlated revenue has been recognized. Revenue recognition is defined as recognized revenue when
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FINANCIAL REPORTING product is sold and/or services are completed. Historical cost is based on the financial reporting of what was paid for an item. An example of this is that a company that provides a service to their customer but only completes a portion of that service, i.e. seventy-five percent, the company cannot recognize that revenue until the job is one hundred percent completed (Q&A: Financial Reporting Model). Oversees the Accounting Profession The financial reporting model concepts are underlined by the standards developed evolvement. The standards have been developed by the experts of the industry, such as the Certified Public Accountants (CPAs) or the American Institute of Certified Public Accountants (AICPA). Additionally, financial or industry analysts and bankers are also interested parties.
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  • Spring '12
  • James
  • Balance Sheet, U.S. Securities and Exchange Commission, Form 10-K

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